Corporate Cybersecurity Investments Increase 5x Since 2009

As cyberthreats loom larger, corporations are not only boosting their own security efforts but also increasing their investments in private companies across the cybersecurity ecosystem.

This report takes an in-depth look at corporate investments into cybersecurity.  Specifically, it looks at financing, stage, geography trends to the space. All of the data covered is available on the CB Insights venture capital database.

Corporate cybersecurity deals, dollars hits high in 2014

Since 2010, corporate investors have participated in over 140 deals totaling $1.37B to cybersecurity companies. Notably, 2014 YTD has seen corporate investors participate in a higher number of large cybersecurity deals than in years past. Cybersecurity funding in 2014 YTD with corporate participation is already 29% higher than in all of 2013 and 129% larger than that of 2012. And there are still a couple of months remaining in the year.

39% of corporate cybersecurity deals at mid-stage

Since 2009, corporate investments in cybersecurity have been primarily split among early-stage and mid-stage deals, which took 38% and 39% respectively. Late-stage deals took 23% of corporate cybersecurity activity over the period.

As mentioned above, corporates have participated in a number of larger cybersecurity financings in 2014 YTD including Skyhigh Networks‘ $40M Series C (Salesforce Ventures), Centrify‘s $42M Series E (Samsung Ventures, Fortinet, Docomo Capital), and Ionic Security‘s $25.5M Series B (Google Ventures) to name a few. Early-stage corporate deals in cybersecurity this year have gone to startups with a diversity of focus areas ranging from authentication APIs (Authy) to crowd-sourced cyber security intelligence (ThreatStream) to browser traffic encryption (Zenmate).

The chart below highlights the distribution of corporate deals by stage within cybersecurity.

Silicon Valley dominates U.S. corporate cybersecurity investment

When we look at U.S. cybersecurity startups, Silicon Valley has taken the lion’s share of corporate investment deals over the past few years. In fact, 57% of U.S. corporate cybersecurity deals went to California-based companies. California-based corporate deals in 2014 include vArmour (Citi Ventures), OpenDNS (Cisco Investments) and Lastline (Dell Ventures, Presidio Ventures) to name a few. The top 3 states were rounded out by Massachusetts and New York, which both saw less than 10% of share.

Internationally, Israel took the most cybersecurity deals involving strategics over the period including ThetaRay (General Electric) and Fortscale (Intel Capital).

Intel Capital is the most active corporate investor in cybersecurity

Peeling back the top corporate investors in cybersecurity companies since 2009, Intel Capital top the list of investors with notable investments including Vectra Networks, Mocana and Bromium. In an earlier analysis, Intel Capital also ranked first with the most cybersecurity exits among all VCs. Highly active corporate venture arms Google Ventures and Qualcomm Ventures finish out the top 3.

Interestingly, a diverse group of corporate investors make up the list ranging from financial services firms to industrial conglomerates to security providers.

Note: Both corporations making investments in startups and separately delineated corporate venture units were included in the dataset. For more data on corporate venture arms, check out our Q2 2014 Corporate Venture Activity Report.

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